Oil-rich African nations no better off than neighbors

WASHINGTON – Despite the massive profits available to oil-rich African countries, which have had an estimated $1 trillion in export revenues over the past 40 years, they are no better off than African nations that do not have petroleum to export.

The problem of persistent poverty in nations where multinational companies extract natural resources is unsettling to Rees Warne, a Catholic Relief Services adviser on extractive industries.

“In so many of the countries that are not rich, the money isn’t going through the government,” Warne said Feb. 13 at a forum, “Reversing the Resource Curse,” held during the annual Catholic Social Ministry Gathering in Washington. Intimating that oil contract funds were being skimmed, she added, “There are a lot of opportunities for Swiss bank accounts to become pretty happy.”

Warne said while much of her focus has been on oil in Africa the situation is hardly limited to that resource or that continent, citing logging and mining in South America.

A Peruvian mine, she said, provided a good example of why it is necessary to follow the money governments receive from contracts: “The mine in Peru allocated money for transportation improvements. Most of that was spent on roads leading to the mine.”

The focus on oil, according to Warne, is because “there are relatively few players” both among multinational oil firms and among government negotiators in African nations, making it easier to narrow down where “a lack of financial transparency” occurs.

Warne said Africans call it “chop fine” – a Nigerian slang term for corruption.

In Nigeria, “13 percent of oil revenue is supposed to go to the four states where it is produced. That’s $650 million in one month. When you’re talking about people with a per capita income of $1,450 a year, that’s an awful lot of money,” Warne said. But in many instances federal officials divert the contract payments.

“There is more accountability at lower levels – if there are systems of accountability” present, Warne added, describing how some tribal chiefs who were given federal government funds to keep the national government from frittering them away had instead frittered away the money themselves.

“There’s a vast misuse of funds at this level. One tribal chief used 40 percent of his funds for his soccer team. … No soccer field was ever built,” she said, but there were lots of trips to other countries to see soccer games, including World Cup matches.

In another instance, she said, “15 percent of the local budget was meant to go for school rehabilitation. Not one of the schools had had any rehabilitation in the last six years.”

But multinationals are hardly off the hook when it comes to accountability. “Corporate social responsibility funds are providing schools to localities. That’s good, but that shouldn’t absolve governments,” Warne said.

“I can’t tell you how many happy smiling kids with soccer balls and soccer uniforms I’ve seen in corporate social responsibility statements,” she added. “I don’t want to take away the kids’ soccer uniforms, but what if those kids had clean drinking water and soccer uniforms?”

Donations, Warne said, “should be sustainable. It’s OK if you build a school, but don’t you need teachers and books?”

Warne showed video footage of one African village where an oil company had built a hospital, a post office and a women’s development center. None of the buildings had ever been used.

“There is talk about SEC (Securities and Exchange Commission) regulation” of contracts between oil companies and governments, Warne said, although there is debate about how much information should be made public.

“There is a Publish What You Pay Coalition,” she added, which is a collection of 300 nongovernmental organizations binding together to pressure oil firms to publish the payments they make to governments for resource extraction rights. Some companies argue they would be put at a competitive disadvantage if rival Chinese firms are making African oil contracts without similar transparency.

One route to greater transparency, Warne said, is hedge funds with these companies in their portfolios. Hedge funds, she noted, are “issuing very, very, very strong support for transparency – because they’re protecting their investors’ money.”

Catholic Review

Catholic Review

The Catholic Review is the official publication of the Archdiocese of Baltimore.